Ukrainian President acknowledges that the IMF's demand to raise the price of gas is 'a difficult issue'

Tuesday, March 13, 2018 7:00:47 PM

Ukrainian President Petro Poroshenko hopes that the government and the International Monetary Fund will find a compromise regarding the price of gas for the population. He said this on Monday at a meeting with business representatives.

"The complicated question is the Fund's demand to raise the gas price. Our cooperation with the IMF is an important priority for us... I have no doubt that dialogue with the fund is needed. The adoption of Stockholm's arbitration decision, the change in price parity is an objective circumstance that must be taken into account. I am confident that the Ministry of Finance and other negotiators will do their best to find a reasonable balance between the need for cooperation with creditors and the interests of Ukrainian households," Poroshenko said.

The President added that investors rely on Ukraine's cooperation with the IMF and that the European Commission’s decision to grant Ukraine 1 billion euros of macro-financial assistance depends on it.

The increase in the prices for the public to market level and the creation of the Anti-Corruption Court are the two main requirements of the IMF. Ukraine’s progress in meeting those requirements is necessary to release a new tranche from the current loan program.

However, according to the current methodology for determining the price of gas by import parity, retail tariffs for the population should be sharply increased: from 6.9 hryvnia ($0.26) per cubic meter to about 10.75 hryvnia ($0.41) per cubic meter.

Ukrainian authorities are not ready to take such a step. According to unofficial data, the Cabinet of Ministers offered the IMF an alternative solution. It provides for raising tariffs by 2% to 3% per quarter. By October 2019, the gas price will have to increase by approximately 16% according to preliminary estimates.